Not all noncompete agreements are created equal - DVM
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Not all noncompete agreements are created equal
Neither new veterinary school graduates nor boarded specialists should suffer with boilerplate contract language.


DVM360 MAGAZINE


Recession-friendly non-competes

So what are the potential solutions to this dilemma? Certainly many employers would be unwilling to forego non-competes. Most would also be reluctant to guarantee employment for a full contract year regardless of the practice's ability to pay the associate. The answer, then, lies with the non-competition language itself.

It's important to keep in mind that non-compete covenants don't have to be "boilerplate" legal language. They can be customized to fit individual circumstances. Yes, it's true that most non-compete covenants simply forbid an employed veterinarian from practicing anywhere else within a certain specified distance of their employer's business for a set amount of time after employment ends. However, that simple formula can and probably should be changed to accommodate the employment realities of this ever-evolving veterinary market.

Let's look at some interesting ideas for tailoring a non-compete covenant to individual circumstances:
  • New graduate contracts. In a lean economy, it's prudent to examine just how much of a competitive threat is actually posed by the recently minted associate coming to work at a first or second job out of vet school. For years, seasoned DVMs have complained that their new hires lack the confidence and experience they want in a new associate. Yet these fledgling practitioners are asked to sign blanket non-compete agreements covering multiple years and extended distances.

Does the competition risk posed by these new grads actually justify the severity of such a daunting non-compete? How much damage can an associate possibly cause to an employer if she works for somebody else across town after only one or two years with her original employer? Is the likelihood that clients will instantly "bond" with new graduates so great that it justifies asking them to risk having to default on student loans and break their home leases in the event that business tapers off at the workplace? Because that's what will happen if associates are laid off and kept from every other practice in town.

One solution is a graduated non-compete. During the first year, for example, an employer could write in, say, a five-mile non-compete that would apply if the associate quit. On the other hand, if the employment is terminated by the employer during that first year (other than for cause), the non-compete would only prevent taking a position within a radius of half of that distance.

This type of framework would provide reasonable protection for the workplace. What it wouldn't do is demand a tedious obligation on the part of the associate in a case where employment is lost through an action attributable to the employer, including an unexpected drop in caseload.

  • Experienced associate and boarded-doctor contracts. The non-compete issue is more complicated with seasoned practitioners. When fashioning their non-compete covenants, ask these two crucial questions:

1. Should the associate be able to abandon a percentage-compensation arrangement in favor of a set minimum "base salary" in exchange for agreeing to a non-compete? When that option doesn't exist, the associate bears all the risk of a drop in the practice's client traffic.

2. If the caseload provided by the practice falls to such an extent that experienced and/or boarded veterinarians can't earn even a reasonable base salary, should they be contractually relieved (partially or fully) from their non-competition obligation?

In the case of boarded doctors, the non-compete distance in the employment contract may extend to a distance preventing them from taking any other job in their specialty throughout an entire metropolitan area.

To prevent such a specialist from having to move out of town to get work during an economic downturn, it might be preferable to include a provision in the employment contract to allow per-diem work at other facilities.

Another option would be to draft the non-compete to permit general veterinary relief practice outside of a fairly limited non-compete distance. This would permit the specialist to replace any income which the main employer may become incapable of supplying due to flagging demand for specialty services.

Dr. Allen is president of the Associates in Veterinary Law P.C., which provides legal and consulting services to veterinarians. Call (607) 754-1510 or visit
.

For a complete list of articles by Dr. Allen, visit http://dvm360.com/allen/


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Source: DVM360 MAGAZINE,
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